The National Electrical and Communications Association (NECA), together with representatives from union and other peak building and construction industry subcontractor associations, have called for the introduction of statutory trust measures to protect small to medium businesses against insolvency, rather than big companies and financial institutions.

The calls for the implementation of statutory trusts, which see subcontractor and tradespeople’s payments secured in the case of liquidation, have been reignited with the recent collapse of Oracle.

The homebuilder’s collapse highlights the ongoing risks posed to subcontractors who lack basic protections already offered to secured creditors, including big banks and large construction companies.

Performing up to 80-85% of all work within the construction industry, NECA and other representatives have urged that subcontractors cannot continue to be overlooked in the wake of multiple high-profile collapses.

“Subcontractors are taking on disproportionate and unfair amounts of risk on construction projects. Family-owned and operated businesses are being taken advantage of by unscrupulous or incompetent construction companies who are imposing unfair contract terms, using tradies to bankroll their mistakes,” NECA chief executive Oliver Judd says.

“Simply put, we must establish sound and uniform security of payment regulations nationwide that ensure statutory trusts are a staple of contracts, ensuring that hardworking subbies feel confident continuing to deliver the critical infrastructure the nation needs.”

John Murray AM says that many builders operate by adopting a business model that is premised on using other people’s monies as free working capital: “In other words, when builders receive payments from clients, they use such monies to meet their general business operations, including diverting the monies to fund their other projects, rather than pay their subcontractors who had in fact carried out 85% of the building work.”

He adds that the industry desperately needs to reform current payment practices because when the builders’ business model collapses and the builder becomes insolvent, subcontractors are left out in the cold.

“Only the introduction of legislation that imputes all monies that a builder receives from its client as monies to be held in trust for the party that had carried out construction work will redress the current immoral practices that pervade the industry,” John explains.

NECA, together with leading subcontractor industry and union groups, is calling upon the Federal Government to implement the full recommendations of John Murray AM’s Review of Security of Payment Laws including statutory trusts.

Click here to download a copy of the group’s Statement of Agreement.